In The End, We're All Criminals

If everyone makes a calculated choice to break an arbitrary rule, is the rule valid or invalid?

Dec 10, 2022

You could become cops or criminals. When you’re facing a loaded gun…

A great quote from Frank Costello; a fictional Boston-based crime boss from the movie The Departed. Cop or criminal? When your life is on the line the label probably doesn't matter all that much. I can’t say I really disagree. We are all sinners. The question is to what degree.

When a government collapses, it’s often because the populace has become fed up enough with some aspect of the governance that the people start taking extreme measures; sometimes violent measures. America moved away from simply being the colonized cashflow assets belonging to the king of England by revolting and becoming an independent sovereign nation. Turns out taxation without representation isn’t sustainable.

More recently, protestors in Sri Lanka famously took the swimming pool of then-President Gotabaya Rajapaksa after the country defaulted on debt obligations and Rajapaksa fled the country. I promise I’m not comparing Sri Lankan protestors to American revolutionaries; merely illustrating a point. I think you can argue just about everything comes down to the economics of any decision. There comes a point when the risk associated with breaking a law is outweighed by the reward of being a ‘criminal’ as that law is written.

Everyone’s individual risk tolerance is different, but we’re all playing the same game. If enough people agree that the reward from being a ‘criminal’ outweighs the risk, the law being broken quickly ceases to matter. Essentially when the law is no longer respected, it is no longer enforceable. If the law is not enforceable, it is no longer a valid law. This is all just my opinion, of course. I’m not a lawyer so please don’t treat this like legal advice. But I believe it’s clear each society has a relationship with the legal system in that society.

The determination that honoring the authority of your ruler is no longer economical isn’t just limited to citizen protest - this works both ways. There are plenty of government employees and corporate interests that clearly don’t care about the rules. This is often a result of that risk/reward profile I mentioned above becoming too skewed to reward.

The Governance Grift

When a government isn’t scared of repercussions, it becomes corrupt. When a business doesn’t have to worry about market forces, it crosses lines. Our elected officials are completely unafraid of real accountability levied by the citizens. Major corporations have no fear of competition because the regulators have been captured and barriers to entry are often too costly for new entrants. But don’t get it twisted, there is no fear of serious repercussions.

This is why examples of the grift have seemingly become more brazen:

The US government puts opensource software on the OFAC list because of money laundering yet the pentagon fails a fifth consecutive audit
A congresswoman’s husband makes 7-figure stock market bets on companies that his wife has legislative influence over
Central bankers make 7-figure bets on economic data and policy decisions that aren’t yet public but Martha Stewart goes to jail for 5-figure trades
Pfizer pays $2.3 billion in fines for fraudulently marketing drugs a year after grossing $48.3 billion in drug sales
JPMorgan pays a $920 million settlement for manipulating the metal and treasury markets a year after grossing $115.6 billion in annual revenue
The Gary Gensler-connected Sam Bankman-Fried steals billions of dollars from over a million people, while Gary Gensler is busy talking about Kim Kardashian on TV
Jeffrey Epstein ~~was whacked~~ kiLLeD hIMsELf while on suicide watch in front of not one, but two malfunctioning security cameras

Highlighting the SBF/Regulatory capture grift once more; if you can steal billions from your customers to bail out poor risk management decisions by yourself and your degen friends, is it worth the risk if all you have to do is say sorry repeatedly to any writer or Twitter spaces host who will talk to you while you maintain your freedom on one of the most beautiful islands in the world? Maybe only if you lack any moral compass whatsoever.

Alan @Alan_Path

@RepMaxineWaters @SBF_FTX 💋

We’ll see what happens with Sam. I don’t think that story is over by any stretch but it’s probably not wonderful that the people in congress tasked with getting to the bottom of this were blowing this man kisses not too long ago.

So much grift. Why?

Because FYTW

These things have a way of getting flipped around though. What if you told FDR to screw himself when he said hoarding gold was illegal in 1933? Turns out you made a decision that on paper was criminal but in practice quite obviously the better call with the benefit of hindsight since Gold’s dollar price had increased by 500% by the time the law was repealed:

If you look hard enough, everyone on this planet is probably a criminal in their local jurisdiction if all governments had the ability to enforce every rule on the books. Thankfully they don’t or this would be a very depressing place. But let’s roll with this Gold being illegal theme shall we? Is there a current day analog to a non-state controlled financial asset being deemed illegal before repricing much higher? Maybe Nigerians know something we don’t know.

Bitcoin? Yes. eNaira? No.

Back in late 2021, Nigeria launched one of the first CBDCs called the eNaira. According to Bloomberg:

When Nigeria became the first African nation to start a central bank digital currency, or CBDC, it was partly targeting the almost 40 million people in the country without a bank account. Policy makers also hoped to take a share of Nigeria’s multi-billion dollar remittance flows and widen the country’s tax base.

According to that article, less than 0.5% of Nigerians are using the eNaira even though doing so on certain services offers a 5% discount. Is it because Nigerians don’t understand cryptocurrency rails? Nope. According to some estimates more than half of Nigeria is using crypto each month. And Nigeria isn’t the only country with civilian crypto usage that high. What is the common thread?

The similarities between countries with high crypto adoption today are more monetary than demographic. The report also notes that seven of the top 10 countries have initiated controls on foreign exchange transactions. The most striking examples here are Turkey and Argentina, two countries where inflation has shot up recently. In these countries, traders have been using crypto as a hedge against inflation until the recent crypto winter.

What makes this all so interesting? Use of crypto is banned in Nigeria. I guess somebody should tell the citizens of that country. Of course, if over half of the country is breaking an arbitrary law against use of computer code, is it really a law anymore? I suppose we’ll find out. Regardless, Nigerians seem to have decided that the risk associated with not breaking the law now exceeds the risk associated with breaking the law. Interesting times…

So what have we learned in the last 13 months? It’s not scary buying something at $69,000 in a mania. Yet it becomes scary buying something at $17,000 after a 75% decline. Should it be though?